How Much Does a Bridging Loan Cost? Rates and Fees
Managing Director + Co-Founder
All commercial loans come with fees and interest, and bridging loans are no different. The cost of bridging loan fees is considerably higher compared to other types of commercial finance, with increased rates of interest and arrangement fees, but this doesn’t make them inherently unaffordable. Read on to find out how much a bridging loan costs, including any bridging loan rates and fees you may need to consider.
How much does a bridging loan cost?
The cost of a bridging loan is dependent on how much you take out and how long you need it for. You can borrow large amounts of money over a short period of time, and interest rates vary. The amount you can borrow generally depends on the value of an asset you can secure the loan against, how secure your exit strategy is, and what your credit history is like. For this reason, there isn’t a comprehensive cost on how much a bridging loan costs, but generally speaking, you can expect to pay more than through other types of commercial financing.
What is the interest rate on a bridging loan?
When considering the cost of a bridging loan, you’ll need to take into account that Interest rates for bridging loans vary from lender to lender, but generally speaking, you can expect to pay anywhere between 0.55% to 1.5% per month. This is another area where bridging loans vary from other types of business financing; you pay monthly interest rather than a fixed rate across the entire loan term. The interest can be paid monthly alongside your fixed monthly instalment, or it can be paid at the end of the loan term. The bridging loan interest rate isn’t variable.
The majority of bridging finance lenders require you to pay an arrangement fee, also known as a product fee or a facility fee. This is charged at a percentage of how much you want to borrow, but most bridging loans charge around 2%. If you’re borrowing a large amount of money, you might find a lender will lower the arrangement fee or waive it, but in this case, the cost of a bridging loan is wholly dependent on the lender and the amount you’re borrowing.
Other bridging loan fees
There are a few other fees you may need to pay when considering the cost of a bridge loan, including valuation and survey fees if the loan is for a property (these give the lender an insight into how much they could sell the property for if you default on payments), an assessment or admin fee for your application, redemption fees, and exit fees. Some lenders won’t charge an exit fee, but some might. You may also need to pay broker fees and some legal costs depending on what the bridging finance is to be used for.
This is important to factor in because the idea of a bridging loan cost is to pay it off early with another form of funding, so make sure you’re aware of what the exit fees might be so that you can budget them in when you get another loan. Bridging loan lenders generally won’t approve applications where there is no exit route.
Apply for a bridging loan at Aurora Capital
Bridging loans can be expensive, but with the right exit strategy in place to pay off the loan, they can prove to be incredibly useful. If you have questions about the cost of a bridging loan, our bridging loan rates and fees or how to apply, please contact us. If you’re confident about bridging loan fees and know it’s the right option for you, apply for a bridging loan online and our expert team will match you with a lender.
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